Key points of investment

Event: Fubo Group's revenue in 2023 increased 39% year over year to HK$2.0 billion. Gross profit increased 44% year over year to HK$850 million, and gross margin increased 1.5 pct to 42.5% year over year, thanks to improved cost control capabilities and operational efficiency. The loss for 2023 was HK$210,000 (profit of HK$58.1 million in 2022), mainly due to increased sales and R&D expenses. Sales and marketing expenses/ R&D expenses/ administrative expenses increased by 87%/74%/25% year-on-year to HK$2.8/23/20 million respectively in 2023.

By business: In 2023, subscription service revenue increased 58% year-on-year to HK$870 million, accounting for 43% of revenue. The subscription service product matrix continued to improve, many technical services were further upgraded, service capabilities extended to a wider range of copyright fields, expanded new customers in the fields of trademarks, literary works, commercial images, etc., and provided intellectual property services for top international events. In addition to traditional live streaming, it also pioneered other commercial monitoring areas such as licensed product protection and hidden sponsor marketing.

It is expected that as global awareness of copyright protection continues to rise, customer coverage continues to expand, and copyright holders' willingness to pay continues to increase, the company's subscription service will continue to maintain strong certainty.

Revenue from value-added services increased 27% year over year to HK$1.13 billion in 2023, accounting for 57% of revenue.

The company's contracts with major international customers have continued to be upgraded, and the content management penetration rate has increased dramatically; in the Chinese market, it has completed participation in various projects and ongoing construction, and has established continuous cooperation with many major Chinese content parties and continuously expanded the scope of services.

By region: In 2023, the US market revenue increased 33% year over year to HK$980 million, accounting for 49% of revenue. Cooperation with global content providers is stable, the exclusivity of content on streaming platforms is guaranteed, and YouTube's exposure and monetization capabilities have increased. In 2023, the Chinese market revenue increased 44% year over year to HK$1.0 billion, accounting for 50% of revenue. It continued to expand in commercialization fields such as international events, licensed product protection, and hidden sponsor marketing, and progressed smoothly in innovative business areas such as digital cultural trade and platform technology services.

Actively layout the AI field: The company actively lays out the AI field and cooperates with the University of Florida and other institutions to develop digital content copyright technology to cope with changes in the content production and distribution pattern. The company actively develops new products to adapt to changes in market demand, especially in the field of digital assets such as Web3, and builds industry-level copyright protection and transaction infrastructure for the required enterprise platforms.

Profit forecast and investment rating: Considering that the company is speeding up the deployment of video digital watermarking, generative AI, etc., or has a certain impact on the cost side, we will reduce net profit to mother from HK$11/140 million to HK$0.1 billion in 2024-2025, and expect net profit to mother of HK$90 million in 2026.

The current stock price corresponding to 2024-2026 PS is 1.5/1.1/0.8 times, respectively, maintaining a “buy” rating.

Risk warning: Industry competition intensifies, new customers fall short of expectations, policy regulation risks.